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Rules alone won't do: Empirical evidence on sanction mechanisms of fiscal rules and political budget cycles

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  • Mair, Lukas
  • Mosler, Martin

Abstract

We examine the empirical relationship between the sanction mechanisms of fiscal rules and the spending composition across multiple expenditure categories of Swiss sub-national cantons during election periods. Using data from 1992 to 2021, we find that cantons without fiscal rules spend 37.9 Swiss Francs per capita or 3 percent of a standard deviation more on education during election periods, while cantons with fiscal rules but no associated sanction mechanisms in case of non-compliance increase per capita spending on public order by 34.2 Swiss Francs or 11 percent of a standard deviation. In contrast, cantons with fiscal rules that include sanction mechanisms exhibit no statistically significant change in their spending behavior. Our findings suggest that fiscal rules without sanction mechanisms only alter but do not prevent budgetary election effects, while fiscal rules with sanction mechanisms effectively mitigate political budget cycles.

Suggested Citation

  • Mair, Lukas & Mosler, Martin, 2026. "Rules alone won't do: Empirical evidence on sanction mechanisms of fiscal rules and political budget cycles," European Journal of Political Economy, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:poleco:v:92:y:2026:i:c:s0176268025000424
    DOI: 10.1016/j.ejpoleco.2025.102682
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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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